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New GM to Be 'Fully Launched' This Month, Rattner Says

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[source: Wall Street Journal]

New GM to Be 'Fully Launched' This Month, Rattner Says

By JOHN D. STOLL and NEIL KING JR.

General Motors Corp. is set to emerge from bankruptcy into an economic downturn that presents a major challenge for the country's largest auto maker -- and for the White House that saved it.

Sunday's late-night ruling from the bankruptcy court cleared away objections to the GM's reorganization. This week, GM Chief Executive Frederick "Fritz" Henderson plans to introduce a revamped GM as a greener, more customer-focused company with a leaner management, people briefed on the plan say.

By one measure, the company's speedy reorganization marks a success for the government and the beginning of a new era for GM. Over the past five months, the government's task force has completed rescues of GM and Chrysler Group LLC more smoothly than many predicted.

But the new GM has a rough road ahead. The company, soon to be 60% government-owned, continues to lose market share to foreign rivals, having shed nearly two percentage points of its U.S. share in the past six months alone. Some buyers have flocked to GM's chief U.S. rival, Ford Motor Co., allowing Ford to substantially narrow its market-share deficit with GM in June.

GM, meanwhile, is spending nearly $500 more per vehicle than the industry average on sales incentives, and it carries by far the highest inventory levels among its peers, according to Autodata Corp. Plans to sell the Hummer brand and other operations remain in limbo.

For the Obama administration, risks abound as voters and political opponents wait to see a return on the huge sums taxpayers have invested in the auto companies. By the end of the year, the U.S. government will have put $50 billion into GM and more than $12 billion into Chrysler, along with tens of billions more to suppliers, lenders and GM's former credit company, GMAC.

Senior administration officials say from now on they will take a back seat, leaving day-to-day operations to the companies' revamped boards. "We are not going to micromanage," says Steven Rattner, a principal member of the Treasury-led auto task force. "We are not going to pick the color of cars."

Mr. Rattner says GM could make an initial public share offering as early as the first half of 2010, though the government will be judicious in selling its own stakes to get the best deal for taxpayers.

By shedding brands, dealers and significant chunks of debt, GM and Chrysler are better set to survive the sharp downturn in car sales. A deeper and longer slump, though, could upset their plans.

The industry's car and light-truck sales last month came in at an annualized rate of 9.7 million vehicles, down from 9.9 million in May but up from earlier in the year. GM officials say the company should be able to break even if those sales are just above 10 million units a year.

In a sign of how rapidly GM's position has deteriorated in the U.S., the auto maker said Monday that its vehicle sales in China in the first half nearly surpassed the 954,356 vehicles it sold in the U.S.

With 82 days' worth of unsold vehicles stacked on dealer lots, GM has significantly more inventory than any major competitor. To clear the glut, GM ran a fire sale over the weekend, offering buyers 0% financing on 72-month loans.

"The share loss has to stop at some point in order for the company to be truly viable," Mr. Rattner acknowledged.

Mr. Henderson is racing to broker the sale of three brands -- Hummer, Saab and Saturn -- and a stake in its former German subsidiary, Adam Opel GmbH.

People familiar with the sale of a stake in Opel say Beijing Automotive Industry Holding Co. is "a formidable bidder" for Opel. Such an offer could threaten an earlier accepted bid from Canada's Magna International Inc. Meanwhile, GM's effort to sell Hummer to China's Sichuan Tengzhong Heavy Industrial Machinery awaits Chinese government approval.

The Obama administration is putting great stock in its appointment of Edward Whitacre, former chief executive of AT&T Inc., as GM's first independent, nonexecutive chairman since the mid-1990s.

Mr. Whitacre is expected to be introduced as chairman as early as Thursday.

The administration picked him primarily because it didn't think GM's management team had proper oversight or could deliver quick results, according to a person familiar with the matter.

"One of the key things that people will be looking for is whether they are going to manage the company any differently," Bruce Belzowski, a University of Michigan research analyst, says. "They were always way too optimistic about what they were able to accomplish."

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Now that they have the Government money and bankruptcy court has cleared their debts, let's watch and see if they sell all those brands. I bet something comes up where GM changes their mind because a deal couldn't be struck, and they keep the brands they were going to sell at the last minute ...

Edited by PCS
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Now that they have the Government money and bankruptcy court has cleared their debts, let's watch and see if they sell all those brands. I bet something comes up where GM changes their mind because a deal couldn't be struck, and they keep the brands they were going to sell at the last minute ...

Does that also include the brands which are going to be "killed"?

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The administration picked him primarily because it didn't think GM's management team had proper oversight or could deliver quick results, according to a person familiar with the matter.

No $h! Sherlock?

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I don't really care about the brands that are intended to be sold, I only care about the brand mistakenly intended to be killed.
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